January ABI Reveals Continued Growth

MONDAY, FEBRUARY 28, 2022


Last week, The American Institute of Architects released its Architectural Billings Index score for January, revealing a slight improvement in business conditions for architecture firms.

The ABI is a diffusion index derived from the AIA’s monthly Work-on-the-Boards survey, conducted by the AIA Economics and Market Research Group. The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.

For each report, the survey panel asks participants whether their billings increased, decreased or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated. An index score of 50 represents no change in firm billings from the previous month, a score above 50 indicates an increase in firm billings from the previous month and a score below 50 indicates a decline in firm billings from the previous month.

Kicking Off 2022

While the ABI score remained at 51 for the month of January, it marked the twelfth consecutive month of positive readings for the index. Inquiries into new work and the value of new design contracts both remained strong as well, reporting scores of 61.9 and 56.1 respectively.

“Architecture billings, while remaining at very healthy levels in recent months, have slowed considerably from the middle of last year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “This no doubt reflects delays in the construction sector caused by supply challenges for both labor and materials, as well as ongoing staffing constraints at architecture firms.”

Additional highlights from the January report included:

  • Regional averages: South (61.2); Midwest (51.5); West (47.6); Northeast (46.8); and
  • Sector index breakdown: mixed practice (59.3); multi-family residential (50.1); commercial/industrial (54.2); institutional (47.3).

The report notes that the regional and sector categories were calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Data representing the month of January and all of 2021 can be viewed here.

Staffing, Employment and Compensation Concerns

The AIA went on to note in its report that ongoing staffing concerns are expected to produce another year of above average compensation increases as well. However, with scores regarding new design contracts continuing to exceed the billings index, the Institute believes that project backlogs will also continue to grow and could serve as a cushion to ensure healthy future workloads.

With that being said, the industry has also reported strong gains in employment in comparison to 2021. It is also believed that the $1.2 trillion infrastructure package will spur further gains, particularly for the construction sector.

Throughout 2021, it was reported that construction and architectural services added 163,000 and 12,100 payroll positions, respectively. The additions reportedly offset the respective 168,000 and 12,700 positions lost in 2020. In recent months, the unemployment rate has been hovering around 4%, however, last month the construction industry witnessed the loss of 5,000 positions nationally on a seasonally adjusted basis. Architecture firms, though, managed to add 4,500 new positions on net—a pace that would net 18,000 on an annual basis—over the last three months.

While staffing and employment seems to be making a positive turnaround, there is still a continued pressure on companies and firms to uphold increased compensation levels, both for filling open positions and retaining employees.

In January’s survey, 40% of responding firms indicated that compensation for entry level positions (0 to 3 years’ experience) at their firm increased by 6% or more in 2021. Almost half of firms (48%) reported that compensation for mid-level positions (4 to 10 years) increased by 6% or more, and 31% of firms reported that compensation for senior level staff (over 10 years but excluding principals and partners) had increased by the same amount.

With regards to experience level, 23% of firms indicated that compensation is a very serious issue for entry level positions, 44% felt that it is a very serious issue for mid-level positions and 31% for senior level positions.

Going into 2022, over a third of firms (37%) believe that compensation will increase by another 6% or more. Nationally, firms are expecting compensation to increase 5% on average, with larger firms expecting even larger compensation increases.

Previous Results

Last month, AIA confirmed that the ABI ended 2021 on a strong note, having reported a score of 52 for the month of December.

The ABI score for rose one point compared to 51 reported in November. Despite the positive reading, AIA reported that staff recruitments were becoming a growing concern among firms, among other ongoing issues, such as concerns related to the omicron variant, rising prices and availability of construction materials.

Inquiries into new work and the value of new design contracts both remained strong, however, and backlogs—at an average of 6.5 months—remained near their highest levels since the AIA began tracking this metric in 2010.

Additional highlights about the December report included:

  • Regional averages: South (56.4); Midwest (51.0); West (47.5); Northeast (45.3);
  • Sector index breakdown: mixed practice (60.6); multi-family residential (49.2); commercial/industrial (49.2); institutional (47.6);
  • Project inquiries index: 66.8; and
  • Design contracts index: 55.8.

For its tenth consecutive month, the AIA reported that the ABI revealed a continued demand for design services in November.

The ABI score for the month was logged at being 51. While the score had slightly reduced from October’s 54.3. During November, scoring for both the new project inquiries and design contracts moderated slightly, but remained in positive territory, posting scores of 59.4 and 55.8, respectively.

Additional highlights about the November report included:

  • Regional averages: Midwest (57.6); South (53.7); West (50.9); Northeast (45.5); and
  • Sector index breakdown: mixed practice (56.9); multi-family residential (51.4); commercial/industrial (50.5); institutional (50.1).

In October, the AIA reported that it’s ABI score for the month fell slightly to 54.3 compared to the 56.6 recorded in September. During October, scoring for both the new project inquiries and design contracts expanded, posting scores of 62.9 and 58.0, respectively.

Other key highlights from the October ABI included:

  • Regional averages: Midwest (61.9); South (58.2); West (53.4); Northeast (48.6); and
  • Sector index breakdown: mixed practice (58.7); commercial/industrial (57.4); multi-family residential (55.8); institutional (51.4).

The previous month, the ABI score increased slightly from 55.6 in August to 56.6. The single-digit increase was witnessed from July to August as well.

While the ABI continued to climb throughout the spring and summer of 2021, it wasn’t until February that the report would indicate its first positive mark since before the COVID-19 pandemic. Reportedly a boost from January’s score of 44.9, the report revealed a score of 53.3.

One of the ABI’s lowest points was at the end of March 2020, when it plummeted from the pandemic. That index revealed a 20.1 drop in points to a score of 33.3. The score nearly doubled the decrease of 9.4 points experienced at the beginning of the 2001 recession and the loss of 8.3 points recorded during the Great Recession, making it the index’s largest single month decline in its nearly 25-year history.

   

Tagged categories: American Institute of Architects (AIA); Architects; Architecture; Billings; Color + Design; Commercial / Architectural; Commerial/Architectural; COVID-19; Economy; Maintenance + Renovation; Market; Market data; NA; North America; Program/Project Management; Project Management; Projects - Commercial

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